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Cabot (CBT) Earnings and Sales Fall Short Of Estimates in Q4

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Cabot Corporation (CBT - Free Report) reported profits of $33 million or 55 cents per share in the fourth quarter of fiscal 2019 (ended Sep 30, 2019), down from $94 million or $1.51 per share in the year-ago quarter.

Barring one-time items, adjusted earnings per share were $1.05, up from $1.00 in the year-ago quarter. However, earnings per share missed the Zacks Consensus Estimate of $1.10.

Net sales fell around 2.7% year over year to $827 million in the quarter. It lagged the Zacks Consensus Estimate of $847.8 million.

Growth in new business sales, strong commercial execution and cost-reduction actions helped the company to reduce the impact of continued weakness in the China business and global automobile production.

Cabot Corporation Price, Consensus and EPS Surprise

 

Segment Highlights

Reinforcement Materials’ sales fell around 3.2% year over year to $452 million in the fiscal fourth quarter. Earnings before Interest and Tax (EBIT) in the segment were $71 million, up around 10.9% year over year. The rise resulted from increased volume, improved product and pricing mix, and reduced costs.

Sales in the Performance Chemicals unit went up 0.8% year over year to $259 million in the quarter. EBIT increased 2.5% year over year to $41 million on higher volume.

Sales in the Purification Solutions declined 6.9% year over year to $68 million in the quarter. EBIT increased $4 million year over year on increased margins from improved product and pricing mix as well as reduced costs.

Financial Position

Cabot had cash and cash equivalents of $169 million at the end of fiscal 2019, down around 3.43% year over year. The company’s long-term debt rose almost 42.4% year over year to $1,024 million.

Cash flows from operating activities were $195 million in the reported quarter. Capital expenditure was $69 million.

Outlook

Cabot anticipates first-quarter fiscal 2020 to be challenging as customers actively manage year-end inventory levels. Gains from the new fumed silica plant in China and Reinforcement Materials' customer agreements are likely to aid the company in fiscal 2020.Due to the International Marine Organization’s (IMO) new regulation, which is affecting both Reinforcement Materials and Performance Chemicals units, the company will continue to witness fluctuations in feedstock costs. It expects the Purification Solutions segment to witness year-over-year growth on continued benefits from its transformation plan. In fiscal 2020, Cabot’s Specialty Fluids business, which was divested in fiscal 2019, will not contribute to EBIT. The company expects adjusted earnings per share of $3.60-$4.10 for fiscal 2020.

Price Performance

Shares of Cabot have lost 0.3% in the past year compared with the industry’s 25% decline.

 

 

Zacks Rank & Stocks to Consider

Cabot currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the basic materials space are Kinross Gold Corporation (KGC - Free Report) , Franco-Nevada Corporation (FNV - Free Report) and Agnico Eagle Mines Limited (AEM - Free Report) , each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Kinross has an expected earnings growth rate of 210% for 2019. The company’s shares have surged 77% in the past year.

Franco-Nevada has a projected earnings growth rate of 39.3% for 2019. The company’s shares have rallied 46.1% in a year.

Agnico Eagle has an estimated earnings growth rate of 168.6% for the current year. Its shares have gained 64% in the past year.

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